Webio Exec Charged In $12 Million Ponzi Scheme

David Hernandez faces four counts of mail fraud

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    NEWSLETTERS

    David Hernandez may not be smiling about the feds charging him with four counts of mail fraud.

     A west suburban man has been indicted for allegedly swindling nearly 300 investors in a $12 million Ponzi scheme, federal authorities announced Friday. He allegedly used the money to pay himself and others, and start a sports-talk Web site.

    David J. Hernandez, 48, of Downers Grove, was charged with four counts of mail fraud in a federal indictment returned late Thursday, according to a release from the U.S. Attorney’s Office.

    Hernandez was initially charged with a single count of mail fraud in a criminal complaint filed in U.S. District Court in Chicago on June 17, several days after FBI agents executed a search warrant at the offices of NextStep on the 22nd floor at 225 W. Washington St., according to the release.

    After Hernandez was located June 22 by police in Normal, he appeared in federal court in Peoria June 29 and was ordered transferred to custody in Chicago. He is expected to arrive in Chicago next week, at which time his first court appearance will be scheduled, according to the release.

    Hernandez was indicted by a federal grand jury for allegedly engaging in a two-year Ponzi scheme that resulted in losses totaling about $3.5 million when it collapsed last month.

    The indictment alleges he fraudulently induced some 290 people to invest approximately $12 million through NextStep Financial Services and several related companies, according to the release

    In addition to the mail fraud counts, the indictment seeks forfeiture of approximately $3.5 million and two cars: a 2009 Audi and a 2007 Mercedes Benz ML350.

    According to the indictment, between July 2007 and June 2009, Hernandez defrauded prospective investors with a “Guaranteed Investment Contract.”  He made false promises regarding the risk of investing, the manner in which the victims’ funds would be used, the returns generated and his background.

    Hernandez allegedly falsely promised investors monthly returns of 10 to 16 percent, with no risk of loss to their principal, according to the release.

    He also fraudulently stated the principal was protected through insurance that NextStep obtained from various insurance companies, the indictment alleges.

    He allegedly converted the funds to his own benefit and used the money to make Ponzi-style “interest” payments to other investors, according to the release.

    Hernandez, who co-founded the now-defunct ChicagoSportsWebio.com with popular broadcaster Mike North, was released from a hospital in late June following an alleged drug-induced suicide attempt.

    If convicted, each count of mail fraud carries maximum penalty of 20 years in prison and a $250,000 fine, the release said.